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(Bloomberg) -- Volkswagen AG’s namesake brand is considering making additional sport utility vehicles at its U.S. factory to bring the site to full capacity by 2020, and potentially build electric cars there as well, but uncertainty over possible trade barriers under President Donald Trump is complicating plans.
“It has been a roller-coaster of emotions over the past months,” VW brand chief Herbert Diess said late Wednesday at the presentation of the marque’s new Arteon flagship model near Hanover, Germany. “We hope that we’re going to have clarity in the next months. It influences investment decisions.”
Boosting sales and reversing losses in North America is a crucial part of Diess’s effort to strengthen the VW nameplate’s weak profit margins outside China and emerge from the diesel-emissions scandal. Trump has repeatedly complained about Germany’s trade surplus with the U.S., particularly blaming the auto industry for selling too many cars in the country. While VW makes the Passat sedan and Atlas SUV in Chattanooga, Tennessee, it’s vulnerable to any new import tariffs as most of the vehicles it sells in the U.S. come from Mexico and Europe.
“We would like to strengthen the Chattanooga plant,” Diess said. “The U.S. is a key market for every global automaker. It offers the biggest profit pool, and we have a lot of growth potential in the region.”
The $1 billion Chattanooga car factory employs about 3,200 people and can produce 150,000 vehicles annually. Until recently, the site’s only product was the $22,440 mid-size Passat, but the facility wasn’t fully utilized as U.S. demand for the model faded, with only 73,000 autos delivered last year. The factory started making the $30,000 Atlas in late 2016. It’s VW’s first midsize SUV and, along with an additional, longer-wheelbase version of the brand’s smaller Tiguan, is intended to boost the carmaker’s presence in an increasingly popular model segment.
The four-door Arteon coupe will be priced at about 34,800 euros ($39,100) when it goes on sale in Germany this month. The model represents the VW brand’s latest strategy to attract buyers of upscale vehicles from luxury-car makers Mercedes-Benz and BMW AG after its previous flagship, the $78,000 Phaeton sedan, which was axed a year ago due to poor sales.
The Arteon will be produced at VW’s northern German factory in Emden along with the European version of the Passat and shipped to markets including China and the U.S., which would potentially expose the model to new duties that the Trump administration might impose. Until now, the Chattanooga plant’s main trade benefit for VW was to reduce the effects of currency shifts that frequently hurt earnings when its cars were imported from Europe.
VW expects to sell about 40,000 Arteons a year, Diess said. That’s similar to deliveries of the predecessor CC model, a coupe variant of the Passat, which was also discontinued in 2016.
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